BNY Mellon: Reinventing Payments

Nov 14, 2016 | Meghan Elison

BNY Mellon is focused on reinventing payments. So is Ripple. Image: Alekjds

In a recent report titled, “Reinventing Payments in an Era of Modernization,” worldwide banking and financial services corporation BNY Mellon evinces a cautious optimism about distributed ledger technology. The report points out the challenges in the current payments infrastructure: risk, end-to-end cost, timeliness, customer experience, transparency, and managing information every step of the way.

With customer expectations driving a need for a fully digital, cost-effective, and real-time customer experience, BNY Mellon gives very familiar advice: banks, customers, and fintechs alike will be best served by collaboration. Banks can offer legacy advantages of established trust and relationships. Solutions providers can offer banks the ability to compete for customers and cut internal costs. The report suggests that “if we work together as an industry, it is very possible that we can deliver that global payment experience within the next 10 years. But we have a lot of work to do before then!”

Ultimately, BNY Mellon sees the success of distributed ledger technology being predicated on three basic criteria: network effect, regulatory engagements and standards. Network effect, naturally, requires a greater percentage of participation than any of the up-and-coming networks has now. These consortia and governance groups grow, but none yet boasts a truly global reach to rival that of competitors like Visa.

Similarly, regulatory engagement will require the creation of rules and guidance to govern market participants as the technology evolves to serve the market. On the subject of standards, BNY Mellon points out that Ripple has made a major stride in providing a standard to enable payments across payment networks: Interledger.

“While various organizations and consortiums are working on blockchain standards (e.g., R3, Hyperledger as previously described) there is yet no true blockchain standard, which also impedes progress. Ripple’s Interledger Protocol aims to solve this challenge by enabling diverse ledgers to seamlessly interact with each other.”

The final word in this report is unequivocal: customer experience will be the deciding factor in whether banks stay in the payments business at all. As regulations shift to open up the market, banks will have to do something they have not done in a long time: compete.